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opinion

China's problem with GMOs

China is a huge global economic power, and their large population and growing middle class is resulting in greater need for commodity imports. A huge imported product is soybeans. The soybeans imported are primarily processed for the meal which is then fed to livestock, with very little used in actual food production for items like tofu, soy milk, etc.

While there are some areas near the coast that utilize imported soybeans in food items due to the economic advantages, most areas of the country remain wary of imported soybeans. The caution stems from a broader issue: fear of genetically modified organisms. This fear initially came from the government, which encouraged suspicion of GMOs in order to potentially use that fear to influence trade policy in future negotiations. However, recent scares with food quality/safety with a broad range of food items is raising citizens' concern over food sourcing.

GMOs are just a part of the fears around this. While China remains a huge importer of many food items (soybeans, oils, dairy, meat, etc.), consumer demand in a growing middle class will influence trade patterns of agricultural products.

Wheat

Wheat markets continue to see little volatility. Kansas City and Chicago pushed to new contract lows before rallying back to the previous trading range, while Minneapolis was comfortable treading water. Winter wheat planting in the U.S. has caught up to the normal pace: 84 percent is complete compared to 87 percent completion for the five-year average. The first crop rating of the season showed 52 percent rated good/excellent compared to 58 percent a year ago. Note that final yields are not highly correlated to winter ratings as spring weather is much more impactful on final output.

Durum

Durum markets were unchanged this week. There has been little to drive the durum market of late. Weekly U.S. export sales totaled just 7,000 metric tons.

Canola

Canola prices firmed, pushing through technical resistance at $520 per metric ton. This barrier had held through last week's rally in the soybean oil market, but fundamental and macro factors pushed prices through that technical point. Demand remains strong for canola oil, and though harvest is basically done and processors have gotten through the physical supply crunch, crush demand is robust. There is also talk of some increased demand from China. Add to this a weaker Canadian dollar and firmer rapeseed markets in Europe, and canola futures had to rise.

Peas and lentils

Lentil and pea markets remain soft through the past week. The U.S. Department of Agriculture's Commodity Credit Corporation in Kansas City purchased 1,190 metric tons of pulses for food aid.

Mustard

It turns out that the Canadian mustard seed crop may be better than initially expected. Saskatchewan Agriculture is expecting total output to reach 133,000 metric tons compared to the initial Statistics Canada forecast of 114,900 metric tons. Yield for all classes in Saskatchewan is lower, at 746 pounds per acre from 917 last year. However, quality is excellent, with 87 percent of the crop likely graded No. 1 with the balance No. 2.